In one of Germany’s biggest tax fraud cases, Andreas Schmid, the founder and former topper of private film investment fund VIP Medienfonds, has been sentenced to six years in prison for tax evasion.
Schmid’s one-time partner and former VIP chief exec Andreas Grosch was sentenced to two years probation.
Under Schmid, VIP raised E630 million ($920 million) from thousands of German investors to bankroll international and domestic productions including the Roland Emmerich-produced “Trade,” helmer Tom Tykwer’s “Perfume: The Story of a Murderer,” helmer Paul Verhoeven’s “Black Book,” Josh Hartnett starrer “Lucky Number Slevin” and teen spy actioner “Stormbreaker.”
VIP attracted some 10,000 high-bracketed investors who believed their investments in film production were tax deductible.
The court found that VIP used only 20% of funds for film production, keeping the rest in bank accounts to collect interest and secure bank guaranties. This excludes investors from fully writing off their investment, as the coin was not all used for film production.
“Both of the defendants knew that the information in the tax statements were false,” said presiding Munich regional court judge Huberta Knoeringer at Tuesday’s ruling.
Schmid and Grosch must now pay back millions in back taxes.
The ruling is a boost for irate VIP investors, who face millions of euros owed in back taxes as a result of their investments.
They are seeking damages from Schmid and a number of banks that marketed VIP funds, including the Commerzbank, Dresdner Bank and the HypoVereinsbank. The court’s decision is likely to strengthen their claims for damages.
Schmid, who is expected to appeal, has already been in jail for more than two years, initially at the request of prosecutors who feared he would flee the country while they probed VIP, and throughout the seven-month trial. The time he served will be credited to his sentence.
Schmid was freed on $5.8 million bail until the commencement of his sentence.